Corn growers raise insurance issues

Sun Belt farmers tend to think of crop insurance as a Southern problem. Many still believe the federal program provides inadequate coverage unless you're “farming for the insurance,” which is another story.

So it was interesting to read the take of farmers from another region during the Sept. 24 hearing on federal crop insurance by the House Agriculture Subcommittee on General Farm Commodities Risk Management.

Ron Litterer, a corn, soybean and hog producer from Greene, Iowa, said that while the Agriculture Risk Protection Act of 2000 was a major step forward, the National Corn Growers Association believes Congress still needs to do more work on federal crop insurance.

“I do not need to belabor the point that the past few years have been very challenging for corn growers,” he said. “Many producers have faced depressed markets followed by a period of prolonged drought — conditions that have jeopardized their financial viability and even forced their exit from agriculture.”

The transition to the new farm bill has also required considerable adjustments by producers and lending institutions as the timing of payments has impacted cash flows, he said.

Litterer, chairman of the NCGA's Public Policy Action Team, said higher levels of premium subsidies have not only resulted in significant increases in participation and the percentage of acres covered, but it has “facilitated a dramatic shift toward higher levels of coverage.”

Still, areas that need improvement remain.

“Producers have a much more reliable farm bill in terms of protection against depressed commodity prices,” he said. “But we also have to recognize that many crop insurance participants who experience shallow, but significant crop losses in back to back years can find themselves in no man's land.”

If farmers lose 25 percent of their crop, for example, they most likely cannot file a loss claim nor would they qualify under the current disaster program. “One year with this kind of loss should be sustainable, but two or three years can seriously impact net farm income and erode a producers' equity.”

Multiyear losses of the type experienced by growers North and South in recent years can also affect average production history and consequently the value of indemnity payments.

“We urge the committee and RMA to consider innovative alternatives beyond artificial adjustments to T yields and the APH,” said Litterer. “We fear that this kind of approach would invite ill-advised planting decisions, and unintended consequences of higher premiums for producers.”

Among those: the development of supplemental insurance that would cover a producer's deductible when two years of consecutive losses exceed a predetermined percentage of average production.